Banding Together: Wage & Hour Class Action Lawsuits

There’s no such thing as a wage and hour class action, at least when the Fair Labor Standards Act (FLSA) is involved. The FLSA is a federal law that guarantees most US workers at least the minimum wage ($7.25 per hour) and overtime pay for any hours worked over 40 in one week. When employers violate the FLSA, workers can choose to file individual civil lawsuits, or band together, and file what the Act calls a “collective action.”

More and more employees are choosing the latter route. In fact, workers today file more collective actions for violations of the Fair Labor Standards Act’s wage and hour provisions than every other type of employment-related class action combined. But collective action isn’t quite the same as class action. We’ll discuss the differences in this article.

How Do Class Actions Work?

Where the Fair Labor Standards Act is concerned, class actions proceed in a very specific way. In fact, workers aren’t allowed to pursue a traditional class action for violations of the FLSA.

The law outlines a different legal process for groups of workers who believe they were all unfairly deprived of the minimum wage or overtime in a similar way. This process is usually referred to as “collective action,” rather than class action, although neither term appears in the text of the Fair Labor Standards Act’s section 215, where penalties for violating the Act’s provisions are elaborated.

Collective Action

Here’s how the Fair Labor Standards Act puts it:

“An action to recover the liability prescribed in either of the preceding sections may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.” 29 U.S.C. § 216(b)

The end of that quote is what’s really important. Traditional class actions have been, at least since the 1960s, “opt-out.” Only one, two or a few plaintiffs will actually file the lawsuit, but they’ll do so on behalf of a much wider group of individuals, believing that, in time, other people who were similarly injured will be happy to share in the outcome.

Those other people, however, are automatically considered members of the class, whether or not they’ve been identified yet. Once the case has proceeded a bit, and the representative plaintiffs have figured out who else should be part of the class, they’ll make an effort to notify those other individuals about the case. Each one of those class members can then decide whether or not they want to be part of the case. If they don’t, they can formally “opt-out” and won’t be notified of the case’s outcome.

Opting-In

For employment lawsuits filed under the FLSA, on the other hand, collective actions have to be “opt-in.” In order to join up, a worker must formally file a written “consent” in the applicable court. Workers who opt-in are “bound” by the outcome of the case, and can’t file an individual lawsuit over the same allegations. In contrast, employees who don’t “opt-in” have every right to file their own private action in the first place, but they won’t be able to share in the fruits of the collective action.

Few potential class members “opt-out” of traditional class actions. Only around 2% of class members ever choose to back-out of a class action, according to the RAND Institute for Civil Justice. For collective actions, however, the rate of “opt-in” is the exact opposite. Between 75% and 90% of workers eligible to join a collective action fail to “opt-in.”

Traditional class actions often use an “opt-in” system when it comes to distributing winnings. After a settlement or jury verdict is reached, the representative class members will make every effort to notify class members of the award. Class members then have to send back a form, laying claim to a portion of the award. In many class actions, fewer than 10% of eligible class members ever do that.

Statute Of Limitations

Under the Fair Labor Standards Act, the statute of limitations on wage and hour claims is two years, unless a worker can show that their employer “willfully” violated the Act’s provisions, in which case the statute is extended to three years.

A statute of limitations is like a legal time limit, restricting the amount of time people have to file a lawsuit. Usually, the statute begins counting down on the date of an injury, or on the date a person discovers that their injury was caused by someone else’s actions.

Filing a traditional class action, though, “tolls” the statute of limitations for every potential class member: the statute stops running. “Tolling” the statutes becomes very important because the court first has to decide whether or not a class of similarly-injured individuals actually exists. That’s called “class certification.” Collective actions under the FLSA have to be certified, too, but filing the initial lawsuit only “tolls” the statute for workers who have opted-in. For employees who haven’t yet made up their minds, or ones who haven’t been notified of the collective action yet, the statute of limitations continues to run – and may run out.

What Labor Laws Are Class Actions Based On?

Most collective actions filed in relation to wage and hour issues are based on violations of the Fair Labor Standards Act. So being paid less than the federal minimum wage, or being eligible for overtime pay but not receiving it, are good places to start.

Employers, however, use many nuanced tricks to cheat their workers out of hard-earned pay, schemes that can be far more complex than simply failing to pay an employee at the correct rate. You can learn about 6 of these common scams here.

Workers can also file wage and hour lawsuits under various state laws, many of which now entitle employees to higher minimum wages than the federal level, and some of which are more generous in terms of overtime. Importantly, wage and hour lawsuits based on state, rather than federal, law need not be confined to “collective actions.” In other words, workers who base their lawsuits on state law can file traditional class actions.

To learn about the specific wage and hour laws in your state, check out our guide “Overtime & Minimum Wage Laws: State By State.” In recent years, some employees have even started lawsuits based both on the FLSA and a state law, in the same lawsuit, blurring the line between class action and collective action.

How Do You Start A Collective Action?

Once a worker believes that their employer is violating a wage and hour law, they’ll look around for other employees who might be “similarly situated.” That’s the language the Fair Labor Standards Act uses, and it’s a requirement for FLSA collective actions.

Finding Similarly Situated Employees

Unfortunately, the law doesn’t define what “similarly situated” means, but a little logic (and two examples) can get us pretty far in this department.

Are you one of 50 workers who are all paid on a “gang-time” system, and only compensated for the time you spend at your workstation? Think that gang-time system is depriving you of the compensation you’ve rightfully earned? Then it’s quite possible that everyone working under that gang-time system is also a victim of wage theft, and thus “similarly situated.”

Are you considered an “assistant manager” at a grocery store, but spend more than 50% of your work-time ringing customers out? Under those circumstances, it would be reasonable to suspect that you’ve been “misclassified” under the FLSA, so that your employer doesn’t have to pay you overtime. It would also be reasonable to suspect that other “assistant managers” at your workplace are “similarly situated.”

Some companies even have policies, ranging over thousands of individuals and multiple departments, that systematically deprive workers of the pay to which they are legally-entitled. Collective actions can include hundreds, even thousands, of “similarly situated” workers.

Getting Certified As A Collective Action

After identifying “similarly situated” employees, a worker’s next step would be to contact an experienced wage and hour attorney, discuss the situation and, if there’s a viable case, file for collective action status with an appropriate court.

The certification process for collective actions is separated into two phases. Collective actions receive “conditional certification” or “notice” first, when the court decides whether or not the initial plaintiffs should be allowed to notify other employees of the lawsuits. At this point, most courts will use a fairly lenient standard to determine whether a group of “similarly situated” workers exists, but plaintiffs will have to back up their claim to collective action with “modest factual” evidence. Similar, but not identical, job duties and pay standards, are usually the guide for this preliminary certification.

Getting Certified – Again

Once “conditional certification” has been granted, plaintiffs can proceed with their lawsuit, notifying other similarly situated employees that they can “opt-in” and conducting “discovery,” gathering facts and evidence to build the case. After discovery is done, and the facts have been laid bare, the court will return to the question of certification, and decide whether or not the lawsuit should be allowed to proceed to trial as a collective action. Courts generally use a stricter standard for certification during this second stage, taking into account the specific similarities and differences between employees that came to light during discovery.

They’ll also look into the kinds of defenses that an employer intends to use at trial. Can those defenses be extended to all of the opt-in plaintiffs equally, or will they only apply to certain individuals? The more “general” a defendant’s defenses, the more likely certification as a collective action becomes.

After receiving that second certification, the lawsuit can go to court, and be litigated as a collective action.